Basically a true knight would have failed here. Of course that is exactly what Nicodemus wants you to believe. It would make Harry less effective and increase Murphy’s suffering. Except being a human in this case was more important than being a knight. It is not that Karen let the whole world burn. In the end breaking find was repairable.
Most people would have failed as a knight, some people would have failed as a human being. Some of them would have given up the sword immediately afterwards because the sword is not just something wonderful, it is also a burden that sometimes unrealistic demands. Sacrifice is part of it and that includes self sacrifice.And then you have to ask yourself what is more important. Failing as a knight or failing as a human being by not even trying?
In Murphy's shoe, the best I could think of to get out of the predicament presented in skin game is for Murphy to resolutely put pressure on Nicodemous. If the Genoskwa truly kills Harry, I am certain that fid can be freely wielded to cut off Nick's head.
If Murphy is resolute enough and Nick is convinced of her resolution, Between his own life and taking revenge on Harry, I have about 70% confidence that Nick will back off. However, if Murphy make this choice, I will be personally disappointed in her role as Harry's love interest. It is a bit too cold hearted for my taste.
Furthermore, if Murphy is indeed that resolute, Nicodemous will just let Harry go and then lodge a complaint to Mab. Harry getting caught red handed while helping Butters is already a violation of Mab's given word. Murphy, as Harry's + 1, attacking and threatening Nico is another violation. Mab will be put in a bind and Harry will definitely suffer the consequences. Even if Harry does not die, he will at least shed 3 layers of skin from this deboccle. If only the laws of TWG is the only thing at play, but this is not the case, the laws of the fae world is involve in the matter and as we seen in book 3, TWG cannot interfere when the fae is within their rights.
Not to mention that this matter involves 5 great artifact in Hades's vault. Mab being put in a bind may result in these artifacts falling into Nick's hands, and that will be a far greater disaster then just one holy sword being broken.
Murphy and Michael, with Uriel's help, ended the matter cleanly on the spot. It eliminates all other possible complications. If the matter can be so easily shrug off by Harry saying" "You can't kill me!". Not just Harry will end up looking stupid, even Uriel is that much of a joke putting his entire grace at risk for mere BS from Nick.
Heck, if not for WoJ confirming that TWG cannot interfere with a mortal's free will, I almost convinced that the entire thing is a setup by the Almighty himself. The sword is allowed to idle around doing nothing, in the custody of Murphy who clearly stated her desire not to be come a knight. Meanwhile the world is going worse by the day. And it happens that this unworthy person is there just so to break a sword that a true knight definitely cannot broken, which resulted in saving a very powerful and very important fulcrum of a mortal wizard, which also prepare the sword into a lightsaber from which suited the future true knight far better. It is almost look like TWG allow Murphy to keep fid just so she can break it in the proper time and place.
If there is any power who could craft such a complicated setup without actually interfering with a mortal's free will, TWG will be that power. It will also explain why the power of Heaven allow the holy swords to stay idle for so long. I mean, there is about 7 billion people out there. Even if people like Michael is as rare as a Unicorn horn and phoenix feather, it is unlikely that Heaven can't arrange and find 2 such people to wield them, corruption in the church notwithstanding.